Is the rate cut cycle for the Australian Dollar $AUDUSD over? Taking a look technically – 28 March 2014

byesvxmonMarch 28, 2014

Is the rate cut cycle over for the Aussie (AUDUSD) dollar? Lets look at the charts and what do they suggest. They reveal a stunning pattern supported by the ratios on the longer term monthly, weekly and daily charts.

Taking a look at the longer term monthly chart, the Aussie dollar, AUDUSD completed a bigger AB = CD pattern from the lows in 2001, marked as A on the chart and the point B is the high reached in 2008. Point C is the 78.6% Fibonacci retracement of this entire up swing. Also the 127.2% Fibonacci expansion of the swing labeled BC is close to the 78.6% Fibonacci retracement. Together these form a zone of confluence levels of Fibonacci ratios. These ratios form this confluence zone around the 0.5950 level, the low in 2008 for the AUDUSD was around 0.6000. Given that these are very long term monthly charts, it is still pretty close to a 50 pip precision. When this line segment AB is projected in price from the point C, we get a price target of 1.1100, this is about the level where the Aussie dollar, AUDUSD, formed a top in 2011. The price after forming this top has rotated lower in an ABCD pattern move. The low reached in January 2014, is the 78.6% Fibonacci retracement of the low reached in 2010 and the high reached in 2011. Further, the red line represent ABCD pattern, where point D is the 127.2% price projection of the line segment AB when projected from point C. Together, the 78.6% Fibonacci retracement and the 127.2% Fibonacci expansion form a confluence zone of Fibonacci ratios, which is worth paying attention to. Further, from a price action perspective, we see the month of February 2014 was an inside month and the month of March broke out of the highs of the month of February 2014. However, there are resistance levels which need to be taken out for the further upside. We zoom into the weekly and later the daily chart to take a closer look.

AUDUSD Monthly chart – March 2014. www.marketchartpattern.com

The weekly chart for the Aussie dollar, AUDUSD zoom into the ABCD pattern discussed. It could be seen on the weekly chart the price found support at the 78.6% Fibonacci retracement of the lows in 2010 to the high reached in 2011. Further there are two AB = CD patterns which form a further confluence level of Fibonacci ratios to provide support. A zone worth paying attention to. There is also an inverse head and shoulder formation into play.

AUDUSD Weekly chart – 28 March 2014. www.marketchartpattern.com

Taking a closer look at the daily chart. There is a probable inverse head and shoulder pattern in play. Whilst continuing to move up, the price did retrace forming a symmetric move, these were discussed in the previous article. Click on the link to view the article. The price has reached a critical level, the 61.8% Fibonacci retracement of the highs reached last October 2013 and the recent lows in January 2014. Further there is a AB = CD pattern formation around 9300/30 level and also a 161.8% Fibonacci expansion of the swing low from the highs in early January 2014 to the low reached in January. These form a zone of Fibonacci confluence which could act as a resistance zone. For the price to move high, the Aussie dollar move close above these levels of 93000/30. It is possible to for the price to rotate lower from this resistance.

If it is indeed a significant low and start of a bull market, HM Gartley in his book ‘Profits in the Stock Market’ published in 1935 mentioned to buy a new bull market on a AB CD pattern pull back. We shall watch this pair if it pulls back and watch the pattern formation.